Understanding the CARES Act
While we are all navigating through the recent events effected by the Coronavirus, we'd like to share what we have learned about the $2 trillion economic relief plan approved by the House on Friday, March 27th. It brings forth a variety of actions to aid U.S. citizens, along with spurring economic stability and growth in our local communities.
Cash Payments
Single adults with Social Security numbers who have an adjusted gross income of $75,000 or less will get the full amount of $1,200. Married couples with no children earning $150,000 or less will receive a total of $2,400. Taxpayers filing as head of household will get the full amount if they earned $112,500 or less. Above those income figures, the payment decreases until it stops completely for single people earning $99,000 or married people who have no children and earn $198,000. According to the Senate Finance Committee, a family with two children will no longer be eligible for any payments if its income surpassed $218,000.
Self-Employed and Gig Workers
Typically, self-employed workers or freelancers cannot apply for unemployment benefits. However, this new bill creates a temporary Pandemic Unemployment Assistance program through the end of this year to help people who lose work as a direct result of the pandemic. Self-employed individuals can delay the payment of the employer-portion of the FICA (Social Security) payroll taxes or one-half the SECA (self-employment taxes) until after 2020 – one half is due in 2021 and the other half in 2022.
Retirement Accounts
Individuals with retirement accounts, including IRAs, can take early withdrawals of up to $100,000 from those accounts without having to pay the 10% early-withdrawal penalty. Those who withdraw such funds can redeposit them to the plan over three years, or can keep the money and pay the tax on the withdrawals over a three-year period. Individuals aged 70.5 years or older do not have to worry about taking required minimum distributions from retirement plans in 2020, or paying the taxes on those distributions.
Unemployment
Pandemic Unemployment Assistance benefits are provided to individuals who are unemployed, partially unemployed, or unable to work for the weeks these individuals were impacted as a result of COVID-19 between January 27, 2020 - December 31, 2020. This includes a maximum of 39 weeks of assistance and the amount is set by federal regulations and state programs. It can be increased by $600/per week for up to four months in an amount referred to as Federal Pandemic Unemployment Compensation. This excludes individuals who can telework or who are receiving sick leave or other paid leave benefits.
Small Businesses
The bill has special provisions for companies with 500 or fewer employees. You will see new changes to rules for expenses and deductions meant to make it easier for those companies to keep employees on the payroll and stay open. The bill provides $10 billion for grants of up to $10,000 to provide emergency funds for small businesses to cover immediate operating costs. There is $350 billion allocated for the Small Business Administration to provide loans of up to $10 million per business. Any portion of that loan used to maintain payroll, keep workers on the books or pay for rent, mortgage and existing debt could be forgiven, provided workers stay employed through the end of June.
Renters
It's important for renters to know their options in this uncertain time. This bill puts a temporary, nationwide eviction moratorium in place for any renters whose landlords have mortgages backed or owned by Fannie Mae, Freddie Mac and other federal entities. This will last for 120 days after the bill passes, and dictates that landlords cannot collect any fees or penalties for nonpayment of rent. If you have questions about payments plans or rent challenges, it's always best to contact your landlord earlier rather than later, and discuss your options.
If you have specific questions about your situation, it's always best to seek professional advice from your trusted financial advisor. The full bill, right from the source, can be found online here. Should you have questions about navigating the real estate market, and how recent changes may affect your situation, I would be happy to schedule a virtual appointment and advise you.